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Jack Welch

I was right about that strange jobs report

In August, the labor-force participation rate in the U.S. dropped to 63.5%, the lowest since September 1981. By definition, fewer people in the workforce leads to better unemployment numbers. That’s why the unemployment rate dropped to 8.1% in August from 8.3% in July.

Meanwhile, we’re told in the BLS report that in the months of August and September, federal, state and local governments added 602,000 workers to their payrolls, the largest two-month increase in more than 20 years. And the BLS tells us that, overall, 873,000 workers were added in September, the largest one-month increase since 1983, during the booming Reagan recovery.

These three statistics—the labor-force participation rate, the growth in government workers, and overall job growth, all multidecade records achieved over the past two months—have to raise some eyebrows. There were no economists, liberal or conservative, predicting that unemployment in September would drop below 8%. …

The good news is that the current debate has resulted in people giving the whole issue of unemployment data more thought. Moreover, it led to some of the campaign’s biggest supporters admitting that the number merited a closer look—and even expressing skepticism. The New York Times in a Sunday editorial, for instance, acknowledged the 7.8% figure is “partly due to a statistical fluke.”

Imagine a country where challenging the ruling authorities—questioning, say, a piece of data released by central headquarters—would result in mobs of administration sympathizers claiming you should feel “embarrassed” and labeling you a fool, or worse.

Soviet Russia perhaps? Communist China? Nope, that would be the United States right now,

I don’t see why those on the left consider bi government completely trustworthy, but don’t trust big government. My policy is to trust neither. And, quite frankly, I don’t understand the argument as to why I should unquestioningly trust the government, if there even is one. (And I note that the left is where you find a bunch of people talking about “the man.” So clearly unquestioning trust is almost exclusively a results based variable.)

Weak defense and weak article. This is the problem with macro data. I am not saying 7.8% is the correct number, but if Welch claims that there is “subjectivity” involved in these surveys, then 8.3% in August is also circumspect. For all we know, the same accountant did not report his 4 hours a week babysitting “job” back then, pushing the number up to 8.3%.

That said, it is plausible that the number went down because many out-of-work people went back to school in fall, thereby leaving the workforce. Which by no means equals “jobs were added”.

Finally, how difficult is it to measure this objectively? Employers ask for SSN and I assume they have to report new hires to some government agency.

Finally, how difficult is it to measure this objectively? Employers ask for SSN and I assume they have to report new hires to some government agency.

sram on October 10, 2012 at 10:40 AM

Come on. After all the stink that was raised about how employers CAN NOT actually fire someone for having a non-compliant social security number? Are you kidding me? That would require employers to refuse employment to illegal immigrants.

And assuming good faith on your part, let me remind you that it’s not the number Welch is actually complaining about, it’s the number’s inexplicable dip, considering that no incumbent president has ever been re-elected with an unemployment rate over 8%. There was no way that number could have gone down .5% in as short a time as it did while the rest of the corpus of labor statistics remains, for all intents and purposes unchanged.

I’m actually with you in believing that the whole methodology in tracking labor statistics is complete-and-utter horse crap, but that’s not the point here. The point here is that it looks like someone has an agenda. Are you going to stand by and argue that’s not the case? One hell of a coincidence, if indeed it really is a coincidence.

On that basis, you could tap any number of wildly successful CEO’s. Welch isn’t the only one. Problem is, guys (and gals) like him are being demonized. And it’s not just the Obama administration; it’s a cultural phenomenon. The demonization, I mean.

When Romney ascends the presidency, his commerce secretary will be a political appointee with little or no corporate boardroom experience. COUNT IT!

I’m actually with you in believing that the whole methodology in tracking labor statistics is complete-and-utter horse crap, but that’s not the point here. The point here is that it looks like someone has an agenda. Are you going to stand by and argue that’s not the case? One hell of a coincidence, if indeed it really is a coincidence.

gryphon202 on October 10, 2012 at 10:46 AM

The dip from 8.1 to 7.8 is inexplicable and Welch was right in saying that the economy must have grown at breakneck speed for this to happen. Instead of developing on that (he is smart and there is an argument to be made with GDP/Industrial Output etc. and employment), he went on to blame the methodology of the survey. In which case, it is only fair to argue that the 8.3 number could have been equally bad. Expect Krugman or some such economist to pick this line of defense.

Again, let me clarify that the dip is highly circumspect and I suspect foul play, but that is for internet message boards and not for a WSJ article by a celebrated fortune 500 CEO. 🙂

Again, let me clarify that the dip is highly circumspect and I suspect foul play, but that is for internet message boards and not for a WSJ article by a celebrated fortune 500 CEO.

sram on October 10, 2012 at 11:04 AM

If this was indeed a failure on Welch’s part to articulate the nature of this problem accurately, I think he can be forgiven. Welch is articulating what most of us already know. Besides which, this wasn’t front-page hard news. It was in the opinion section.

There aren’t too many that have grown the value of a company already worth $14 billion by 4000%.

Red Cloud on October 10, 2012 at 11:04 AM

Touche. For the record, I think Jack Welch would make a fine secretary of commerce, as would any number of other successful CEO’s. Unfortunately, Welch and his ilk will not be tapped. It will end up being someone like Rebecca Blank.

On that basis, you could tap any number of wildly successful CEO’s. Welch isn’t the only one.

Don’t really want to get in between your discussion, but FYI, Welch is the gold standard for effective business processes and frankly changed modern business with his often misunderstood “upper 10%/bottom 10%” performance measures. Welch is to management & business process what Gates was to integration, Jobs was to design and Dell was to JIT manufacturing. Genuinely a transformational figure. Virtually every US billion dollar+ corporation uses some form (in whole or part) of the management & org structure he set up at GE.

Don’t really want to get in between your discussion, but FYI, Welch is the gold standard for effective business processes and frankly changed modern business with his often misunderstood “upper 10%/bottom 10%” performance measures. Welch is to management & business process what Gates was to integration, Jobs was to design and Dell was to JIT manufacturing. Genuinely a transformational figure. Virtually every US billion dollar+ corporation uses some form (in whole or part) of the management & org structure he set up at GE.

Don’t really want to get in between your discussion, but FYI, Welch is the gold standard for effective business processes and frankly changed modern business with his often misunderstood “upper 10%/bottom 10%” performance measures.

Irritable Pundit on October 10, 2012 at 11:10 AM

True. He rationalized the company and it is baffling that the company continues to be a conglomerate (“conglomerate discount” comes to mind) still. When I buy GE stock, am I buying a jet engine company’s stock or a media company’s stock? I subscribe to the school of thought that I can diversify my investments better than Immelt or Welch.

The dip from 8.1 to 7.8 is inexplicable and Welch was right in saying that the economy must have grown at breakneck speed for this to happen. Instead of developing on that (he is smart and there is an argument to be made with GDP/Industrial Output etc. and employment), he went on to blame the methodology of the survey.

You have the order wrong. He *opened* the piece by describing the methodology of the survey as a means of refuting the Obama admin’s initial faux-shocked pushback to his tweet. In other words, the BLS data isn’t handed down from Heaven on carved tablets every month, so to question the methodology isn’t blasphemy in any circumstance. He then *went on* to talk about how that kind of drop just isn’t plausible given the rest of the (largely unchanged) economic data out there.

I subscribe to the school of thought that I can diversify my investments better than Immelt or Welch.

Probably so. But remember Immelt and Welch are different animals. Welch never wanted Immelt as successor but there wasn’t anyone better at the time, unfortunately. He is not happy with what has happened to GE.